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Why Am I Getting A ‘Gap In Coverage’ Penalty?

Question: I have a Part D plan with a new company for 2022. My company just sent me a letter indicating I have a “gap in coverage” between plans and is charging a penalty. What has happened?

Answer: Each year Centers for Medicare Services (CMS) and the Prescription Drug plans work together to evaluate whether your current or past drug plans provided creditable coverage. Sometimes, Medicare will determine there was a gap between Prescription Drug plans. For instance, you may have had an employee plan through your spouse which ended 26 months after you turned 65. Your employee insurance provided the drug coverage you needed. You had ‘creditable coverage’ from another source therefore you would NOT have a 26 month ‘gap’ in coverage. You just need to prove you had that coverage.

If you are Medicare eligible and are receiving drug coverage from an employee or retiree plan, they MUST provide you with a creditable coverage letter (as long as it is creditable coverage). The letter that is your ‘proof’ that you had coverage from another source. If you don’t have that letter, you must contact your previous employer to request that letter.

If you did NOT have creditable coverage or chose a plan that didn’t cover the cost of prescription medications, you may have had a gap in coverage. When the Medicare Part D law began in 2006 there were rules regarding those without coverage. The Premium Penalty is instituted if you chose NOT to enroll in a prescription drug plan. The Premium Penalty is 1% for each month you are without Prescription Drug Coverage. The 1% premium penalty is based on the average price premium for that year. In 2022, the 1% mathematically becomes $ 0.33. Now multiply .33 cents for 12 months and you have a $3.96 premium penalty per month. Once you join a Part D plan, CMS will assess an additional $3.96 onto your monthly prescription drug premium. The insurance company is informed by CMS of the penalty, and then adds it onto your monthly premium.

Being without prescription drug coverage for a month or two may not be a big deal. If Medicare has a gap of 26 months without creditable prescription drug coverage that is a premium penalty of $8.58 added to your monthly drug premium once you enroll. If you have been eligible for Medicare since June of 2006 and are just now considering getting Part D coverage you have accrued a minimum of 16 years (192 months) worth of penalty; 192 x .33 = $63.36. This premium penalty is not paid just once but added onto your monthly premiums for your prescription drug coverage potentially for the rest of your life.

I have talked with individuals who have been Medicare eligible for years, had coverage and all of a sudden Medicare is saying they have a period without coverage. This notification requires the individual to “prove’ they had coverage. You can prove you had this coverage using the creditable coverage letter the company may have sent you. You can prove you had coverage showing the insurance cards you were using for that period of time. You can also prove you had coverage with documents the company sent you, or premiums you paid to them.

Medicare makes mistakes, also data entry people make mistakes, so your coverage may NOT have had a gap, you need to determine when that gap was and did you have insurance for your prescription drugs during that time? If you can prove you had coverage, you can get that premium penalty to go away.

I recommend individuals keep their insurance records for at least two years, but you can see it might justify keeping some of them longer than that.

Often people are unhappy about this Premium Penalty. I understand your frustration. I would ask you to write, call or e-mail your Federal Representative. The Medicare rules are overseen/passed by the Congressmen and Senators of your state. These are the individuals who can change these laws and regulations. I also would encourage you to reach out to the 1-800-medicare or www.medicare.gov.These penalties are designed to influence our decisions to get coverage.

Senior Life Matters is a community based program sponsored by Lutheran Jamestown. For questions and concerns or to reach Janell Sluga, GCMC, call 716-720-9797 or email at SLM@lutheran-jamestown.org.

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